Poland Central Bank Raises Rates By 50 Bps

(RTTNews) - Poland's central bank raised the key interest rate on Tuesday, in line with expectations, amid the threat of high inflation in the future. The Monetary Policy Council decided to increase the NBP interest rates by 0.50 percentage points, the National Bank of Poland said in a statement. The benchmark reference rate was thus raised to 2.25 percent from 1.75 percent.

"Amidst further economic recovery and expected continuation of favorable labor market conditions, as well as probably more lasting impact of external shocks on price dynamics, there persists a risk of inflation running above the NBP inflation target in the monetary policy transmission horizon," the bank said.

"In order to reduce this risk, i.e. striving to decrease inflation to the NBP target in the medium term, the Council decided to increase NBP interest rates again. The increase of the NBP interest rates will also curb inflation expectations."

The previous change in the rate was a 50 basis point hike in December. Headline inflation hit 7.8 percent in November, largely due to high commodity prices, a record high increase in prices of CO2 emission allowances and rising prices of manufactured goods due to supply bottlenecks.

The ongoing economic recovery and demand driven by rising household income have also contributed to higher inflation. The central bank expects these factors, together with a rise in regulated tariffs on electricity, natural gas and thermal energy to keep inflation at an elevated level also in 2022. Meanwhile, a reduction in some tax rates is expected to have a curbing impact on inflation.

The bank expects inflation to decrease in the longer term, underpinned by expected fading of some global shocks currently boosting price growth, as well as by an increase in the NBP interest rates.